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from Global Investing:

Being chic and not saving

Japanese people are generally regarded as saving a lot and not spending much, but in olden times when Tokyo was called Edo (until the mid-19th century), it was considered iki (chic or sophisticated) not to keep one's earnings overnight.

The latest survey from the Central Council for Financial Services Information (part of the Bank of Japan) may suggest that people are going back to that tradition -- although perhaps not for style reasons.

The survey, only available in Japanese so far, showed more than one in four households (consisting of at least two people) said they have no savings, the highest level since the survey started in 1963.

The average level of savings was 11.5 mln yen ($143,232), down 190,000 yen from last year.

More than 40 percent of the respondents said their savings fell from a year ago, double those who said their savings increased.

As Goldman Sachs predicted last year, it may be a matter of time before Japan's savings rate goes negative.

from MacroScope:

APEC’s robots stealing the show

A guide at the "Japanese Experience" exhibition talks to Miim, the Karaoke pal robot, on the sidelines of the APEC meetings in Yokohama, Japan on Nov. 10. REUTERS/Yuriko Nakao

    Miim is one of the more popular delegates at the APEC meetings in Yokohama Japan. She sings. She dances. She tosses her shoulder length hair. She may not be able to spout an alphabet soup of APEC acronyms like the other Asia-Pacific delegates. But she's still pretty lively. For a robot.

    This week's meetings of the Asia-Pacific Economic Cooperation forum have been earnest and most comprehensive . Foreign and trade ministers issued a 20-page statement about all the things they talked about -- a giant free trade zone, protectionism, the Doha round, easing restrictions on businesses, simplifying customs procedures, promoting green industries, cooperating on health and security, you name it. They also have been, and pardon my French here, excruciatingly dull. So far, the meetings and their stupefying statements have been a testimonial to Japan's skill at stating the ambiguous. Call it the opaque meetings. Journalists from around the Pacific rim have been desperately trying to find news as the 21 APEC leaders gather for their annual pow-wow this weekend.

     The annual "silly shirts"  photo shoot, in which leaders don native attire for the class picture of their summit is usually good news fodder, but is going to be a  big let-down this year. The leaders are merely being asked to show up wearing "smart casual" for the photo shoot on Saturday night, before they head inside for a Kabuki show.

   Which brings us back to Miim, the karaoke robot. She, er it, is one of 130 exhibits on display at  "Japan Experience", a government-sponsored exhibition in  the Pacific Yokohama convention center where the APEC meetings are taking place. The exhibit also features "personal mobility vehicles",  a cyborg suit named HAL that enables the wearer to lift really heavy stuff and perform heroically in disaster relief, a talking delivery robot, cute robotic seal pets for use in pediatric therapy, and much other cool stuff . 

    "Welcome to APEC Japan 2010," the anatomically correct Miim says. "This exhibition shows Japan's strengths and attractions. Please see, feel and touch advanced technology and initiatives of Japan."

from MacroScope:

Spend Save Man Woman

Far from being lauded as a virtue, China's high savings rate has been blamed for the economic imbalances underlying the global financial crisis. The criticism being that the Chinese spend too little and rely too much on exporting to Western consumers.

The IMF and World Bank have long called for Beijing to ramp up social spending so its citizens will feel less need to save for a rainy day and instead consume more.

But in their intriguingly named paper,  'A Sexually Unbalanced Model of Current Account Imbalances', New York-based researchers Du Qingyuan and Wei Shang-Jin suggest China's gender imbalance could also be a significant factor in the persistence of its high savings rate.

The pair argue that intensifying competition in the Chinese marriage market is causing men -- or indeed parents with sons -- to raise their savings rates to improve their relative allure among a shrinking pool of potential brides.

A draconian one-child policy, coupled with a traditional preference for male offspring and the availability of selective-sex abortion, has left the country of 1.3 billion facing its most serious demographic crisis.

An estimated 119 boys are born per 100 girls and the Chinese Academy of Social Sciences has warned that this could leave more than 24 million Chinese men of marrying age without spouses by 2020.

This anxiety over the worsening marriage prospects for men could explain why Chinese household savings as a share of disposable income has risen from 16 percent in 1990 to 30 percent in 2007.

from MacroScope:

A grand bargain to solve global imbalances

Michael Pettis, a professor and China expert at the Carnegie Endowment for International Peace, has put together a thorough and informative look at all things U.S.-China trade. It's well worth reading and watching the entire thing, but here's a few highlights that jump out:

* We're likely to see a significant increase in global trade tensions

* China will probably allow the renminbi currency to rise, but not by a lot

* There is a way to resolve those huge global imbalances but it will be painful and the chances of mustering the political will -- in China, the United States and Europe -- look slim.

A bit more on that last point: Pettis thinks that those three players need to "come to some kind of grand agreement."

"China needs to recognize that the trade surpluses it needs to absorb its excess capacity are politically unacceptable in countries suffering from high unemployment.

"Europe and the United States need to understand that China simply can’t adjust quickly enough. In an ideal world, the leadership of the three economies would get together and work out a plan—six years, eight years, however long it took—in which China committed to taking the necessary steps. 

from Breakingviews:

A world of worry on U.S. fiscal health

It turns out the Chinese are curious about how President Barack Obama's healthcare reform plans would impact America's huge fiscal deficit. Government officials are using his Asian trip as an opportunity to ask the White House questions. Detailed questions.

Boilerplate assurances that America won't default on its debt or inflate the shortfall away are apparently not cutting it. Nor should they, when one owns nearly $2 trillion in assets denominated in the currency of a country about to double its national debt over the next decade.

Nothing happening in Washington today should give Beijing any comfort or confidence about what may happen tomorrow. Healthcare reform was originally promoted as a way to "bend the curve" on escalating entitlement costs, the major part of which is financing Medicare and Medicaid. That is looking more and more like an overpromise that can't be delivered.

For instance, a new study from the U.S. government's Centers for Medicare and Medicaid Services finds that the healthcare reform bill recently passed in the House of Representatives would increase healthcare spending to 21.3 percent of GDP by 2019 compared with 20.8 percent under current law. That's bending the curve the wrong way. The study also questions the "long-term viability" of the $500 billion in Medicare cuts meant to help pay for expanded insurance coverage.

In addition, the CMS study gives a clearer cost estimate than the one provided by the Congressional Budget Office. According to the CBO, the 10-year cost of PelosiCare is $894 billion. But that analysis includes early years with little government spending, According to the CMS, the House approach would cost $1 trillion from 2013-2019, or some $140 billion a year when fully put into effect.

Few realists in Washington think any of the current reform plans make a significant dent in the long-term healthcare cost to government. Indeed, the Senate Budget Committee recently held hearing about creating a bipartisan commission to find solutions to America's entitlements problems.

If healthcare reform really bent the curve, there would be a no need for such a commission to do Healthcare Reform 2.0.

from Breakingviews:

Opening up the IMF country club

The International Monetary Fund has been the comeback kid of the financial crisis. Since the meltdown, it has been lavished with favors, including a trebling of its lending capacity and many new responsibilities. The weekend's G20 meeting set the seal on a Lazarus-like revival.

By agreeing to a bold shift of voting power to dynamic emerging markets, the G20 offered the IMF its best guarantee of continued influence and power. This is good news for the global economy.

The decay of the IMF before the financial crisis was in no one's best interests.

The fund had two big problems. First, the IMF's war chest had shrunk sharply relative to global capital flows. This meant that a large emerging nation could no longer rely on the IMF to bail it out in an emergency.

Back in 1990 the stock of global cross-border portfolio investment was just $171 billion while the IMF had the capacity to lend $36 billion. By 2008 cross-border portfolios had ballooned to $3 trillion but the fund's coffers had expanded to just over $200 billion.

In other words, the volume of hot money had expanded some 18 times and the IMF capacity to offset it had increased just six-fold.

This lack of IMF muscle was concealed by the buoyant world economy between 2002 and 2007. Indeed, demand for the IMF's crisis loans plunged to its lowest level in decades. With interest revenues slumping, the IMF forecast a loss of $400 million a year by 2010 and announced the largest layoffs in its 65-year history.

from Breakingviews:

Why Pittsburgh was a start

Einstein once defined insanity as trying the same thing over and over again and expecting different results. Skeptics are already arguing that leading nations are doing precisely this on global imbalances.

They have a point. The quest to rebalance world growth embraced by the G20 in Pittsburgh looks worryingly familiar.

The new Framework for Strong Sustainable and Balanced Growth, based on the draft communique, is hard to distinguish from the failed IMF Multilateral Consultation on Global Imbalances that was launched in 2006. After much fanfare and a year of negotiations the IMF produced nothing more than a series of hollow pledges.

According to this analysis the G20 has done nothing more than create another ugly acronym. But the doubters may yet be confounded. A more balanced global economy will now be easier to achieve. The failure of previous efforts was not a result of the poor design of the negotiating framework. The IMF process was actually very well crafted. Like the new G20 plan, it aimed to harness the magic power of peer pressure.

By bringing together just a select group of lopsided trading nations the IMF process was set up to foster a collegial atmosphere and "frank" discussion. The Fund itself was meant to serve as an independent referee and keep track of progress.

A few tweaks might help make the process more effective. There is merit to the idea of adding "triggers." If current account deficits or surpluses rise over a certain level there would be automatic negotiations to bring delinquent countries back into line.

This could help to counteract the innate timidity of the IMF, which is understandably reluctant to chastise major shareholders.